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đź“… Last Updated: May 12, 2023
✏️ Written By Priyanka Correia
🕵️ Fact-Checked by Caitlin Wood
Business Loans B&B

Tourism is one of the most popular industries in Canada. In fact, in the third quarter of 2020, $11.4 billion dollars was spent on tourism in Canada. Shocking, considering the impact of COVID-19 and the numerous restrictions on travelling. Clearly, travel and tourism are important to many Canadian and travellers from all over the world. Given the popularity of tourism in Canada, owning or running your own motel, B&B or vacation rental can be a lucrative investment. 

If you own or wish to own a motel, bed n’ breakfast, or vacation rental, you’ll need access to a large sum of funds to not only help you get your business off the ground but to help you with the numerous costs associated with running a business.

Learn how to start a business in Canada.

How a Business Loan Can Help Your Business

Whether you’re running a motel, B&B or vacation rental company, a business loan, can help you finance an infinite number of expenses. Whether you use your loan to take on more employees, fix up your property, or move your business to a new location entirely, with the right type of financing, nothing is out of reach.  

Hiring and Training Your Employees

Running a motel, B&B, or vacation rental is no easy task. You need a number of employees to help run your business smoothly. In general, you’ll need a kitchen staff, a cleaning staff, maintenance employees, a manager and more depending on the complexity of your business. For example, you may need to hire professional instructors if your business offers certain activities such as yoga classes, dance classes, fishing, and other activities.

Check out how to set up payroll for your small business

Building and Renovating Your Business

A business loan can help you build/renovate your business’s restaurant, bar, and kitchen. It can also help you upgrade your business by financing the construction of various outdoor sectors such as a garden, pools, fountains, walkways, security walls, or even a bowling/bocce court. 

Business Licences and Permits

In order to legally operate your business in Canada, you’ll need to obtain certain permits and required licenses pertaining to your province. This includes a business license, a liquor license if you’re selling alcohol and other licenses for health and safety. 

Purchasing Equipment and Supplies

Most motels, B&Bs and vacation rentals have their own in-room amenities. A business loan can help you finance these in-room items such as bathrobes, towels, clothing items, bathroom products, and linen supplies. It can also finance the equipment and furniture you need to furnish your bedrooms (beds, televisions/digital cable boxes, cabinets/drawers, mini-fridges/bars, bathrooms, personal safes, desks, chairs, nightstands, etc.) and other building areas (lounge, reception desk, storage facilities, casino, games room, tourist activity center, spa, gym, etc). 

Best Business Loan Providers For Motels, B&Bs and Vacation Rentals

AmountAPRTerm (months)
SharpShooter Funding1k-300kFee-Based: Starting at 9%12- 60 Learn more
OnDeck5k-300k8% – 29% 6-18Learn more
Lending Loop1k-500k+5.9%3-60Learn more
Thinking CapitalUp to 300k8%-22%6-12 Learn more
Merchant Growth5k-500k-6-18Learn more
BDC100K +6.05% +60Learn more
IOU Financial5K-100k15%+12-18Learn more

Cost of a Business Loan

Before applying for a business loan, it’s important to research and understand the cost of borrowing. Doing so will allow you to understand how much money you can borrow without it turning into unmanageable debt. Here are the main factors to consider when calculating the cost of your loan:

  • Interest – The interest rate you qualify for will have the biggest impact on the amount of interest you pay. It’s imperative that you compare rates and obtain quotes to find the best rate and loan terms that suit your needs. 
  • Fees – When borrowing, it’s important to ask your lender about certain fees that can significantly affect the cost of your loan. This includes administration fees, loan origination fees, maintenance fees, as well as potential fees like NSF fees, late payment fees, and prepayment fees. While some of these may seem inconsequential, they can easily add a few hundred to a few thousand dollars to your bill. For example, loan origination fees range between 0.5% to 8% of your loan amount. So a $25,000 loan could lead to $125 to $2,000 dollars in loan origination fees.
  • Loan Amount – The more you borrow, the higher your cost will be. As such, it’s crucial you analyze your business needs and budget to determine exactly how much you need to borrow. Borrowing more than you need will not only increase the amount of interest you pay, but it’ll also be harder to qualify for a lower interest rate, as more money increases your lender’s risk. 
  • Term – Choosing the longest loan term available isn’t always a good choice. While it may reduce your monthly payments, it increases the amount of interest you pay overall. In fact, you can save a few thousand dollars on interest by simply choosing a term that is 1 – 2 years shorter. As seen in the example below, you can save almost $3,000 dollars in interest by choosing a 3-year term over a 5-year term. 

The Difference in Cost Due to Term Length

Business Loan Amount $25,000$25,000
Interest Rate10.5%10.5%
Term Length36 months60 months
Monthly Payment$812.56$537.35
Total Paid$29,252.20$32,240.86
Interest Paid$4,252.20$7,240.86

Alternative Ways to Finance Your Business

There are numerous credit products available in Canada that businesses can take advantage of. Depending on what you’re trying to finance, one option will prove more useful than another. Let’s look over some of these options and how it can help your business. 

Merchant Cash Advance

As a service-based business, much of your sales will come in the form of cash and plastic. If you have a consistent flow of revenue from your card sales, then a merchant cash advance can be a great option to borrow money quickly. It provides loans on the condition that you repay them with a percentage of your future card sales. While this form of financing provides fast funding and has low qualification requirements, it can be expensive. It should only be used in emergency situations where you need money quickly and don’t have any other options. 

Business Line of Credit

Every business owner should have a business line of credit. It is a form of credit that allows you to withdraw money up to a certain credit limit whenever you need it. Like a credit card, these funds can be reused as you pay them back. Moreover, you only have to pay interest on the amount you use. A business line of credit is a great solution for your business’s small or short-term expenses. For example, you can use it to catch up with your payroll payments, renew your license, or any other small expense. 

Equipment Loan 

Whether you’re running a motel, B&B or vacation rental, you’ll need to purchase certain equipment and furniture to furnish all the different areas in your business. This includes the bedrooms, halls, lounge area, kitchen, gym, and more. An equipment loan is a good alternative to a business loan, as it’s easier to qualify for a lower rate and higher loan amount. The reason is, the equipment you purchase acts as collateral for the loan. This security greatly reduces the risk for your lender as if you miss too many payments, the lender can seize your equipment to mitigate any further loss.

Frequently Asked Questions

What should I consider when getting a business loan?

There are a variety of factors to consider when getting a business loan. For one, you should always research your lender before choosing to work with them. The lender’s reputation, customer service, and knowledge of the industry your business is in can all have an impact on your borrowing experience. Moreover, you’ll want to consider the cost of your loan. Be sure to compare rates and obtain quotes to get an idea of what’s the best loan terms for your business’s financial situation. 

How can I maximize my ability to get a business loan?

There are a few things you can do to increase your desirability as a business loan applicant. One of the most obvious ways is by increasing your credit score and improving on general factors lenders consider when approving an applicant. This includes your business debt, revenue, cash flow, business plan, and other financial factors. You can also improve your chances by getting a cosigner or offering an asset to reduce your risk as a borrower.

Can I get a business loan if I have bad credit? 

Yes, while it may be difficult you can still get a business loan with bad credit. In particular, you’ll have a higher chance of getting a business loan with an alternative lender than a traditional bank. The reason is, alternative lenders have more flexible lending standards than banks. They don’t put as much weight on your credit score, rather they consider your business’s overall financial situation. They’ll evaluate your business’s revenue, debt, monthly sales, cash flow, and other financial factors.  

Business Financing For Any Industry

Own a business in another industry? Click here

Bring Your Business Success With a Business Loan

Being an owner in the hospitality and tourism industries is a lot of work, but the reward can often be even greater, that’s why it’s so important to invest in the success of your business.  With Loans Canada, you’ll find a business loan that provides you with: 

  • Cost-effective payment and interest rates
  • An application process that’s easy to understand and can be completed online
  • A reasonable repayment schedule that will reduce your financial strain
  • Fast funding (as few as two days)
Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

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